01 Oct Ideas to Profits Conference held amid entrepreneurial jitters
Appleton, Wis. – For the first time, the Wisconsin Innovation Service Center’s Ideas to Profits Conference was held outside of southeastern Wisconsin, and for the second time, it was held in troubling economic conditions.
As Congress wrangled over a solution to the nation’s financial crisis, business owners gathered at the Radisson Paper Valley Hotel to absorb content that can help them navigate choppy waters. But the 800-pound gorilla in the facility clearly was events in Washington, D.C., where the Bush Administration and Congressional leaders once again tried to craft a bill to address the crisis, and the dire warnings about inaction weighed on the minds of attendees.
Ronald “Bud” Gayhart, director of the Wisconsin Innovation Service Center (WISC), which is based at University of Wisconsin-Whitewater, was mindful that conference workshops and presenters never have operated under such business conditions.
“It’s rather unique to look at where we are right now economically and the challenges the country is facing,” he said. “More importantly, we saw the headline this morning in USA Today saying entrepreneurs are concerned, entrepreneurs are nervous.”
Roughly 100 entrepreneurs and exhibitors were in attendance, including Sunshine Voelker, manager of SideQuik Products, a Highland Park, Ill. company that designs and sells assessories for laptop computers. While some view the crisis as trumped up, Voelker believes those who warn that the short-term credit market already is challenged and would get worse if nothing is done.
Voelker said when it comes to securing a loan, the bar has been raised. “I’m seeing it first hand. I can’t get money, and I haven’t been able to for months,” she said. “I had several banks that said, ‘Whoa, this is a great product, a great business plan, and if this was a year ago, I would have written you a check already. This year, things are very different, and we want to see sales.’
“We’re to the point where we’re just about to make sales,” Voelker said, “and we just need a little bit more money to push us to that point.”
Taken for granted
Entrepreneurs and business leaders attended the conference to find tools and resources to help them stay afloat.
Wisconsin businesses have lagged behind in winning Small Business Innovation Research (SBIR) awards but Brian Curry, chief operating officer for the Milwaukee-based PhysioGenix, said more help may be on the way. The financial crisis may occupy its attention now, but Congress is pondering changes of note to entrepreneurs, including more grants to venture-backed companies and lifting caps for Phase I and II SBIR grants, which faced a sunset until the program was extended into March, 2009.
Following a 2003 Small Business Administration ruling that a company no longer qualifies as a small business if venture capital firms have an equity stake of 50 percent of more in the company, many venture-backed firms have been shut out of SBIR grants. Curry, whose company has transitioned into a contract research organization that does pre-clinical drug development work for pharmaceutical companies, said proposed legislation would change that because bioscience companies need more money to make it through their prolonged product development cycles, and SBIR funding is not enough.
“The companies need the venture capitalists to help support their efforts for commercialization, yet as soon as they go and get VC money, the SBIR program is off the table,” said Curry, who has been involved in the submission of $32 million of federal grants from seven different funding agencies.
The original House bill was more to the liking of business interests than the Senate version, which limited the number of dollars that could be committed to VC-backed firms.
In addition, the House and Senate both have endorsed higher Phase I and II SBIR grants. The Senate would raise Phase I grants from $100,000 to $150,000 and Phase II grants from $750,000 to $1 million, while the House would raise them even higher – to $300,000 for Phase I and to $2.2 million for Phase II.
In virtually every conversation about what angel and venture investors want, a precise explanation of the market for new products is high on their wish list, but attracting capital isn’t the only reason for entrepreneurs to estimate the market space they venture into.
Sandra Beccue, research manager for the WISC, said market research can help assess and quantify the market for new products. Entrepreneurs must determine who will need their products or services and establish the number of potential users, especially potential first buyers. Looking at the competitive landscape – including competitors and their respective sales – also helps to benchmark the price range of potential customers.
“If it’s a new technology, if it’s a destructive technology, they are going to have to do some best ‘guestimations’ to determine whether they can add enough value to ask a higher price, or if they can manufacture something in that range that customers are currently willing to pay,” Beccue said.
“Early-stage market research helps with benchmarking. It also helps them understand what type of intellecutal property currently exists.”
Current economic conditions can make this a frightening time to take the entrepreneurial plunge, and it’s not just about the financial and credit jitters. The nation’s manufacturers cut back production at a faster than expected pace in September, according to the Institute for Supply Management.
In this environment, it’s even more important to tap into available business resources. Conference keynoter Al Lautenslager, an entrepreneur and co-author of the book “Guerilla Marketing in 30 Days” and author of “The Ultimate Guide to Direct Marketing,” advised business owners to stay very close to their banker due to extremely tight credit, and to continue to invest in marketing rather view it as an expense that can be cut in tough times.
Lautenslager, who acknowledged his marketing bias, said he sees more cautious spenders in the business community. “Now is the time, more than ever, for people to market their business because there still are companies growing,” he said. “There are still companies beating this recession. Somebody is still going to place an order for products and services.”
Gayhart counseled entrepreneurs to stay focused on growth.
“When we looked at this conference, we were coming in with more of an innovation focus, and really we’re trying to give people some of the tools to be successful,” he stated. “What we’re seeing now is a more challenging economy and certainly, with the financial mess that we see out there right now, I think our emphasis has to be on ways to stay the course, bolster what you’re doing right now, stay solvent, stay focused, and be prepared for the growth that’s going to come.
“We know that if this is a downturn, it’s going to last maybe six months. We see lots of opportunities on the back side of this thing.”
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